Category

Industrials

Industrials: Toshiba Corp, Shenzhen Expressway Co H and more

By | Daily Briefs, Industrials

In today’s briefing:

  • How Much of Toshiba Is Owned By “Activists”?
  • Shenzhen Expressway (548 HK): 1Q21 Positive Profit Alert Highly Welcome to Shenzhen Int (152 HK)

How Much of Toshiba Is Owned By “Activists”?

By Travis Lundy

This should be considered a Big Question in terms of the Power Dynamics of Shareholders vs Management in the last EGM and the upcoming AGM.

It is difficult to know exactly.

It may also be difficult to define.

It is important to note that the Record Date of the recent EGM was 1 February and in the month after that, nearly 10% of shares out will have changed hands from one type of investor to another. 

It is also important to note that Toshiba directors, if they had chosen to know, could have known a few days into April (before the 6 April CVC approach) with some degree of clarity what the shape of the shareholder base looked like as of 31 March. Most of the rest of us have to wait until the yuho is released near end-June. 

This insight takes a look at the Shareholder Structure as of a point in time when we knew it, and compares it to the rest of MSCI Japan and TOPIX. Then we look at what MIGHT HAVE HAPPENED because of recent float ownership changes and whether that changes anything.


Shenzhen Expressway (548 HK): 1Q21 Positive Profit Alert Highly Welcome to Shenzhen Int (152 HK)

By Osbert Tang, CFA

Shenzhen Expressway Co H (548 HK) announced a positive profit alert for 1Q21, indicating that its recurring profit will reach about Rmb533m, versus losses of Rmb160m a year ago as the impact of COVID-19 subsided. More importantly, such profit indication is even 10.2% higher than 1Q19, suggesting a full-recovery in traffic and toll revenue momentum.

SZ Exp contributed 44.3% of Shenzhen Intl (152 HK)‘s recurring profit (ex-Shenzhen Airlines) in the last two years. The potential acquisition of Shenzhen Investment Holdings Bay Area Development (737 HK) has received waiver from the SFC for a mandatory general offer and a successful conclusion should beef up SZ Exp’s assets. Lastly, with SZ Exp’s target of an estimated 35% increase in its EBITDA, we believe these factors will support SZ Exp’s contribution to SZ Int’s profit outlook in this year.


Before it’s here, it’s on Smartkarma

Industrials: Toshiba Corp, Nissin Electric and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Last Week in Event SPACE: Toshiba, Grab, Huarong, Invesco Office, Intouch, Jardines
  • Nissin Electric (6641 JP): Interregional Grid Plan Should Support Long-Term Growth

Last Week in Event SPACE: Toshiba, Grab, Huarong, Invesco Office, Intouch, Jardines

By David Blennerhassett

Last Week in Event SPACE

  • The King Is Dead, Long Live the King: Toshiba Corp (6502 JP) announces Kurumatani-san is out and Tsunakawa-san is in.
  • Plus, other events, CCASS movements, and Mood Spins.

(This insight covers specific insights & comments involving Stubs, Pairs, Arbitrage, share Classifications, and Events – or SPACE – in the past week)

M&A – ASIA

Toshiba Corp (6502 JP) (Mkt Cap: $19bn; Liquidity: $170mn)

Toshiba’s board supported Kurumatani-san, and has supported his lack of progress and capital plans. It has supported a certain lack of transparency. It supported Kurumatani-san’s objections to the new investigation. But if shareholders don’t trust Kurumatani-san, or the Board’s support of him, and a majority of the senior-most executives distrust the CEO too, then they must distrust the influence he has had on the Board. This cannot be good for the Board and the combination of shareholder activism and senior executive opinion has to be seen as something which could trigger dramatic change. and sure enough, Kurumatani-san is shown the door.

  • The Trade is still to be long. If a PE deal goes through, it should go through well north of ¥5,000/share. While a PE deal seems difficult because of national security concerns, they should be allayed with the right structure and funding. CVC’s talk about involving JIC and DBJ to support funding could lay out a model for KKR and Brookfield  – both rumoured to be kicking tires – to follow.  Fundamentally, there is upside to good execution and good governance. Multiples could definitely rise to match those of rivals which would get the stock well into the ¥6xxx handle. We have multiple private equity funds looking. While a ¥6xxx handle was noted in the press earlier this week, a ¥7xxx handle is appropriate if Kioxia is still part of the asset base being bought. 
  • METI’s involvement in Toshiba’s downfall, while bad, is now overshadowed by METI’s involvement in what are now governance issues. It may be that METI itself would rather see the company taken over and everything cleaned up behind the curtain of private ownership rather than have it play out with public, activist ownership.
  • As Mio Kato has noted repeatedly, the Toshiba Next Plan is not going badly at all. The track Toshiba is on is decent, and if it plays out with better capital allocation that would be all to the good. There is a Kioxia monetisation to wait for. If Coinbase which earns much less than Kioxia as an avatar of technology and the lower cost of fintech disruption of traditional markets can list at US$100bn, then there is money to buy the maker of a scarce commodity.
  • In addition, there is STILL a buy of 15,000,000 shares to complete the TOPIX upweight at the close of 28 April.  If you think that the significant large activists in the stock now will not be sellers because push is coming to shove and they won’t sell before the conclusion, that means the actual float willing to sell is quite a bit smaller than people think it is.

Links to:
Travis Lundy‘s insights: Gaming Out a CVC Bid for Toshiba – The Right Noises, The Wrong Price, and Toast & Toshiba – The King Is Dead, Long Live the King
Mio’s insight: Toshiba – How the Kurumatani Resignation and KKR or Brookfield Bids Could Change Things
David Lepper‘s insight: Toshiba Corp (6502 JP) Chapter 1: CEO Out, Activists up the Game

Invesco Office J Reit (3298 JP)  (Mkt Cap: $1.7bn; Liquidity: $14mn)

Invesco announced that it was asking Starwood Capital Group for an extension of their Tender Offer (launched a week ago) to 60 days. The “problem” is that Starwood is planning on squeezing out minorities in such a way as to not grant them appraisal rights. The concerns are that the squeeze-out will be carried out through procedures that do not give dissenting unitholders an opportunity to express their objections; and that a Mandatory Squeeze-Out is not Anticipated under the Investment Trust Act. The Investment Trust Act does not afford unitholders protections enjoyed by shareholders under the Companies Law, and METI Fair M&A Guidelines are not followed in this case. 

  • The request for an extension is made. It is not, to Travis’ knowledge, absolutely required that the Bidder honour the request for the full 60 days, but he would expect an extension of a certain length. 
  • This is DEFINITELY not a done deal for Starwood. It would make more sense for Invesco J-REIT holders to sell their shares at an uplift in return for shares in another REIT. Travis still thinks Ichigo Office Reit Investment (8975 JP) is the most likely candidate. 
  • Travis would be happy being long here for the short-term, but longer-term, there is a non-negligible possibility that this doesn’t get past the minimum tendering threshold.  At ¥20,840, the shares are 2% through Terms + Dividend. This is somewhat strong for a low-volatility asset in Japan – especially one in uncharted waters. At the end, there could be a game of chicken played between a buyer or buyers and the Bidder.

(link to Travis’ insight: Invesco Office J-REIT Responds to Starwood’s Hostile Offer)

Jardine Matheson Holdings (JM SP) (Mkt Cap: $23bn; Liquidity: $23mn)

The vote at Jardine Strategic Holdings (JS SP)‘s special general meeting was a foregone conclusion. The resolution as set out in the Notice of Special General Meeting contained in the Circular to shareholders on 18 March 2021 was duly passed. 92% of shareholders voted for the resolution. I understand 966.563mn shares voted FOR the resolution, 85.549mn AGAINST, and 55.282mn did nothing. So the turnout was 95%.  Turnout ex-Matheson was ~70%. The maximum dissension is 7.8% of shares out.

  • Collapsing the circularity and removing its quirky complexity may continue to drive interest (from LOs) in Matheson, especially with certain listcos (MAND, HKL, JCNC) trading cheapish.
  • Yet a 14% discount is not particularly attractive for a vast holding company structure. Plus the governance-lacking aspects of the UK’s Standard listing have been laid bare. A derisory offer for Matheson down the track is a real possibility. 

Mainstream Group Holdings Ltd (MAI AU)  (Mkt Cap: $0.2bn; Liquidity: <$1mn)

On 9th March 2021, Australia-based third-party fund administration services provider Mainstream announced they had signed a Scheme Implementation Deed to be acquired by Hong Kong-headquartered Vistra in an all-cash deal that valued the company at a market cap of ~A$170mn. The Offer Price was A$1.20 per share.  MAI has now announced that they had received a superior bid from US-based financial technology company Ss&C Technologies (SSNC US) at an Offer Price of A$2.00/share. 

  • SS&C’s proposal requires the Vistra Scheme Implementation Deed (SID) to be terminated. MAI has notified Vistra about SS&C’s proposal and Vistra has until 16th April 2021 to respond.  Vistra has a matching right and they can decide to match or overbid. If Vistra decide not to exercise their matching right but decide to exercise their call option deeds that Vistra entered into with entities controlled by MAI directors, they will have to vote all shares it received in favour of SS&C’s proposal. Vistra will hold approximately 19.9% as a result of this transaction. 
  • SS&C’s proposal translates to a FY21E EV/EBITDA multiple of 24.2x which is a significant improvement on the EV/EBITDA multiple of 14.2x offered by Vistra. However, it is worth remembering that MAI is a high-growth company with an expected EBITDA CAGR of 28%+ for FY21E-FY23E. If Vistra or another competitive bidder decide to overbid, this situation could become more interesting. 
  • Janaghan Jeyakumar would be long at or below the current trading price. MAI shares are currently at A$1.975 translating to a gross spread of 1.27%. According to the Indicative Timeline provided in the Official Announcement, the Deal is expected to complete in ~3 months. That translates to an annualized spread of 5.1%. In the absence of an overbid by Vistra (or another competitive bidder), Janaghan expects this Deal to complete. 

(link to Janaghan’s insight: Mainstream (MAI AU): Massive Overbid by SS&C, Now Vistra Has to Respond)

Zhejiang Cangnan Instrument (1743 HK)‘s Offer Document has been despatched with the IFA concluding the Offer price to be fair and reasonable. The EGM will take place on the 17 May and the first closing date is the 31 May. As discussed in Zhejiang Cangnan (1743 HK): H-Share Buyback, given the company’s dubious price action last year and shareholder concentration, I would normally give this stock a wide birth. But it is precisely this shareholder concentration that the Offer has an excellent chance of getting up.  Including the 90% tendering condition.

In Square Enix – CTFN Reports M&A Interest, Mio is sceptical as to the CTFN report that Square Enix Holdings (9684 JP) is the subject of M&A interest from a variety of companies. His suspicion is that there are some companies sniffing around Square Enix which would make sense because it is relatively cheap and has some great and unique assets. But he doesn’t think it is available for sale and we do think that Sony could defend it relatively easily.

The share purchase agreement entered into between Zhuhai SASAC and Di Er Ton /Digital Science & Technology, to acquire domestic shares in mobile device manufacturer Beijing Digital Telecom (6188 HK) has now completed. The MGO has subsequently been triggered. The MGO has a 50% tendering condition – attached to ALL voting rights of Beijing Capital. No irrevocables have been received to date. The Composite Document is expected to be despatched by the 16 April, at which time the Offer will be open for acceptances. Link to my insight: Beijing Digital (6188 HK): Zhuhai SASAC’s MGO On Track.

EVENTS

Grab (0967655D SP) 

The proposed transaction with Altimeter Growth Corp (AGC US) represents an expected equity value of US$39.55bn and EV of US$30.36bn, with cash proceeds of US$4.54bn. In past insights on SPACs, beginning with Virtual IPOs/Direct Listings: Uninhibited Price Discovery, one issue for SPACs is their overabundance in the market today, targeting popular private companies. As such, popular private companies can tee up “SPAC-offs,” where various SPACs pitch their deal, competing (mostly) on price.  The higher the acquisition price, the lower the future return for SPAC investors.

  • And Grab has competition. Its main rival is Indonesia’s Gojek (1379371D IJ), and the two courted each other around February last year before irreconcilable differences led to them parting ways in January this year. There is talk Gojek will merge with e-commerce payer Tokopedia and similarly seek a US listing. Mobile gaming and online shopping platform player Sea Ltd (SE US) is also in the mix, and currently boasts a non-insignificant market cap of US$125bn.
  • Pegging the various business ops – mobility, delivery – to peers, one would end up with a lower multiple than what the business is being offered at.

Links to:
Sumeet Singh‘s insight: Grab SPAC Listing – High on Ambition, Very High on Valuation
my insight:  SPAC Grab … At 2x Uber
Shifara Samsudeen‘s insight: Grab: SOTP Suggests Steep Discount to Proposed SPAC Valuation

China Huarong Asset Management (2799 HK)  (Mkt Cap: $5.1bn; Liquidity: $4mn)

Huarong was originally set up in 1999 by Beijing, in response to the Asian financial crisis,  to bail out a State-owned bank – ICBC – before listing. Rumours abound the State may resort to bailing out Huarong or risk a domino effect of losses at other (state-owned) entities which have lent to Huarong. The bailer becomes the bailee?

  • Reportedly a restructuring of Huarong, modeled on the May 2019 government-led bailout of Baoshang Bank, was proposed earlier this year, involving a takeover from a counterparty, and the PBOC opening up the spigots. Part of that plan allegedly involved recovering RMB350bn of Huarong’s outstanding bonds at around par.
  • Alternatively, Huarong is broken up into its securities, banking, trust, and futures divisions – operations deemed “good assets” worth maintaining. And divisions that boast necessary permits. Another asset manager would then step in and take over the running of Huarong as an AMC.
  • With the benefit of the restructuring of Baoshang Bank – and Anbang and Evergrowing Bank – China has developed a mature process to address a situation such as Huarong’s. A more measured de-risking approach is likely here as opposed to a less-than-optimal major debt restructuring, which may result in an unnecessary domino effect for financial companies and creditors of its RMB 350bn of liabilities.
  • I don’t have a strong opinion on Huarong’s equity here, although its P/B of 0.25x compares to its average of 0.5x since listing. But the offshore bonds look like the wrong price.
  • Reuters are now reporting that Chinese regulators have asked banks not to withhold loans to Huarong as part of support measures to stabilize its cash flow. 

(link to my insight: China Huarong Asset Management (2799 HK): This Is Manageable)

In two SCMP articles on the 7 April, PRC media tycoon Li Ruigang, Television Broadcasts (511 HK)‘s largest shareholder (via Young Lion Holdings), discussed his dissatisfaction with TVB’s performance. Unqualified voting controllers – such as Li – at general meetings of TVB are capped at 49%, however, I believe there could be major changes in the Broadcasting Ordinance.  It could be argued that even if that were the case, any reform would occur at a glacial pace – it took the Communications Authority 28 months to review TVB’s shareholding structure. But in TVB (511 HK): Small Screen Saver, I surmise that the accelerated rate at which legislature and reform are occurring in this city, a revamp, should it come, may occur quickly. TVB is very beaten up. Li has a plan, it would seem – one that fits in with CMC’s listing in a couple of years. If he is given the green light, shares will pop, if not on the economics, but at least on sentiment.

A recent internal discussion paper, authored by an executive committee member of the Bauhinia Party – pro-Beijing political party with close links to Beijing’s authorities – refers to the housing issue in Hong Kong, wherein the gap between the rich and poor is widening, causing social unrest to the point of “threatening the security of one country“. The paper indicates the Central government has the right to coordinate the supply of land in Hong Kong. Expropriation would be in flagrant violation of Basic Law protection of private property. But the precision and speed with which legislature and reform are taking place in Hong Kong, such a possibility is all-too-believable. In Hong Kong Property Developers: Eminent Domain I canvass previous attempts to address Hong Kong’s farmland, and see Henderson Land Development (12 HK) has the most to lose from any such extraordinary measure, followed by New World Development (17 HK)

In SK Telecom Equity Spinoff Announcement: Summary, Takeaways, & Price Impact and SK Telecom Officially Announces a Spin-Off to Create a Holding Company Structure, Sanghyun Park and Douglas Kim discuss SK Telecom (017670 KS) finally announced its long-awaited decision to create a new holding company for its non-telecom related subsidiaries

STUBS

I see the discount to NAV at ~12%, versus a one-year average of 21% and a long-term average of more than 25%. By my estimate, the discount to NAV has never been narrower. And the simple ratio (Intouch/Advance) is also at an all-time extreme; with the implied stub around levels only briefly touched previously, before later retracing.

  • Gulf’s holding is problematic and breaks every guideline in corporate governance 101. Intouch is on record that Gulf’s stake in the company is “positive”, reflecting Intouch’s dividend yield and favourable business direction; yet cash outlayed of ~Bt30bn should have been distributed to Gulf shareholders as a dividend – and it is for those shareholders to decide whether to invest in Intouch, not Gulf’s management.
  • Gulf’s buying appears to be done, for now.  I did not expect Gulf to lift its stake from 5% to 10%, then again to 15%, therefore it is difficult to rule out further increases. It is now two and half months since the last stake increase.
  • I’d be shorting Intouch here and buying AIS. I think a more reasonable discount to NAV is >20%. 

M&A – US

Hollysys Automation Technology (HOLI US)  (Mkt Cap: $0.8bn; Liquidity: $5mn)

What a mess. On the 1 February a consortium including co-founder and former Hollysys CEO Baiqing Shao, Ace Funds, and Chinese PE outfit CPE Funds Management bumped its Offer for Hollysys to US$17.10 from US$15.47. Hollysys has yet to make public its opinion on the revised Offer, other than there is no need for shareholders to “take any action at this time”. But the big issue concerns the legal dispute over the beneficial ownership of the Hollysys’ shares held by Ace Lead and the beneficial ownership of the shares of Ace Lead held by Shao, Hollysys announced a legal action had commenced in the Hong Kong High Court against Shao and Ace Lead on March 9, 2021.
  • Cases are ongoing in both Hong Kong and the BVI.  I am no legal expert, and it is not clear how the validity and enforceability of this pans out as to the claims in the BVI – where Hollysys is domiciled – or the Hong Kong Court. Hollysys appears to be claiming the shares held by Ace Lead are held in trust and that Shao is simply not the beneficial owner. Hollysys has also requested that the trial of the lawsuit should take place on an expedited basis in July 2021. Don’t expect any major developments until the conclusion of this trial.
  •  I estimate forward PER/EV-to-EBITDA of 9.0x/2.8x under the indicative proposal, and a PER/EV-to-EBITDA/PBR of 13.1x/3.3x/1.1x on a trailing basis. Before factoring in the large net cash pile –  US$682mn or 88% of the current market cap. Hollysys shares appear substantially undervalued, as does the indicative Offer. 
  • I agree with CPE that the board of Hollysys should convene a shareholder meeting for its shareholders to consider and vote on the consortium’s proposal. It has a fiduciary duty to do this. But such a meeting should only take place once the legal spat has concluded. Shares are cheap here, and may drift cheaper, until a firmer timeline of the legal wrangles unfolds. I suspect CPE will continue to flame the situation with additional press releases in the interim.

On March 26, 2021, MagnaChip Semiconductor Corp (MX US) entered into an agreement to be acquired by Wise Road Capital in all-cash go-private transaction of $29/share. With the prevailing share price of $25.29 as at the close of business on April 12, 2021, the spread at ~15% offers a potentially attractive IRR of between 20% and 32% should the transaction close by the end of December or September. In MergerTalk: Magnachip Semiconductor Corp (MX US)-Wising Up To An Attractive Risk-Arb OpportunityRobert Sassoon lays out why think the spread indicates a rewarding risk-arb opportunity.

M&A – EUROPE

On 13 April, Orange SA (ORA FP) announced that its €22/share offer for Orange Belgium (OBEL BB) was final. The offer price implies 5.1x EV/21E EBITDA (below the median of peers at 5.9x, see table above) and 9.7% 21E FCF yield (source Capital IQ consensus), and 2.2% dividend yield. The market seems to think there are grounds for an improved offer, as the share price is still above the offer price. In Orange Belgium – Orange: Final Offer and Holdouts, Jesus Rodriguez Aguilar recommends buying on any dip below the offer price.

Veolia Environnement SA (VIE FP) has increased its Offer for Suez (SEV FP) from €18 per share to €20.5 per share. The improved offer represents1.5x EV/Fwd revenue, 8.1x EV/EBITDA, 27.4x Fwd P/E, and an implied EV of €25,574 mn and implied equity value of €13,103.6 mn. In Suez – Veolia: Peace Pipe, Jesus reckons this is a rock solid trade, albeit the gross spread is an unexciting 3.2% on a deal that may take up to a year from now to close. Long TP €20.5, and monitor to add on any dip.

SHARE CLASS

In Ping An A/H Premium: Nearing a Discount; Set Up for Expansion, Brian Freitas highlights Ping An A-shares Ping An Insurance Group Co Of China (601318 CH) are trading at parity versus the H-shares Ping An Insurance (H) (2318 HK), suggesting the risk/reward is skewed in favour of buying the A-shares and selling the H-shares.

INDEX REBALS

Kasikornbank PCL (KBANK TB) is included in the MSCI Standard index through its foreign line Kasikornbank PCL (KBANK/F TB) and the NVDR Kasikornbank PCL (KBANK-R TB). In Kasikornbank (KBANK TB) – Double Whammy, Brian sees a high probability of the foreign line being deleted at the upcoming May SAIR since it fails the EM Minimum Liquidity Requirement. There is also a possibility of a reduction in the Foreign Inclusion Factor (FIF) on the Non-Voting Depository Receipt (NVDR) line if the foreign room stays below 15% on the price cutoff date.

China Securities Index Co will announce the changes end May/beginning June and the changes will be effective after the close of trading on 11 June. In CSI300 Index Rebalance Preview: Recovering from the Growth Sell-Off, Brian expects 30 changes at the upcoming June 2021 index review – this is the maximum number of changes that are permitted at a single review. Estimated one-way turnover is 4.08% and will result in a one-way trade of CNY 10.8bn.

NIFTY50 Index Rebalance Preview. At more than a third of the way through the review period that runs from February to July, in NIFTY50 Index Rebalance Preview: Info Edge Could Replace IOC Brian sees one possible change to the index with Info Edge India (INFOE IN) replacing Indian Oil Corp (IOCL IN). There could be more changes if some large stocks like Adani Green Energy Ltd (ADANIGR IN) and Avenue Supermarts Ltd (DMART IN) are included in the Futures & Options (F&O) segment of the market. Vedanta Ltd (VEDL IN) does not make the cut for index inclusion following the 10% reduction in its free float following the open offer.

FTSE TWSE Taiwan 50 Index Rebalance Preview. The next quarterly rebalance will be effective after the close of trading on 18 June and the changes will be announced on 4 June. Data from close of trading on 24 May will be used to determine the list of inclusions and exclusions. Using data from the close of trading on 15 April, Brian reckons in FTSE TWSE Taiwan 50 Index Rebalance Preview: Price/Volume Surge Brings Three Potential Changes that Evergreen Marine Corp (2603 TT)AU Optronics (2409 TT), and Innolux Corp (3481 TT) will be added to the index at the June review, while the three deletions are Wiwynn Corp (6669 TT)Taishin Financial Holding (2887 TT) and Catcher Technology (2474 TT).

OTHER M&A & EVENT UPDATES

CCASS

My ongoing series flags large moves (~10%) in CCASS holdings over the past week or so, moves which are often outside normal market transactions.  These may be indicative of share pledges.  Or potential takeovers. Or simply help understand volume swings. 

Often these moves can easily be explained – the placement of new shares, rights issue, movements subsequent to a takeover, lock-up expiry, amongst others. For those mentioned below, I could not find an obvious reason for the CCASS move.   

Name

% chg

Into

Out of

Janco (8035 HK)10.00%KingswaySilverbricks
Speed Apparel (3860 HK)75.00%ElstoneOutside CCASS
Anchorstone (1592 HK)64.99%Get NiceYuzhou
Tianyun International Holdings (6836 HK) 27.00%China GalaxyOutside CCASS
K Group (8475 HK)25.02%EasyOutside CCASS
Kinetix (8606 HK)33.75%ZundiaoLee Go
Wang On (1222 HK) 32.36%UBSKingston
Sandmartin Intl Hldgs (482 HK) 25.39%SHKMorton
Source: HKEx

The following large movement(s) concern recently listed companies, and therefore are (likely) lock-up related.

Name

% chg

Into

Out of

Mediawelcome (2159 HK)51.76%CitiOutside CCASS
JHBP (Genor) (6998 HK) 11.76%St ChartOutside CCASS
Channel Micron (2115 HK)13.40%MasonOutside CCASS
Source: HKEx

Nissin Electric (6641 JP): Interregional Grid Plan Should Support Long-Term Growth

By Scott Foster

On April 15, the Nikkei reported that Japan’s Ministry of Economy, Trade and Industry and Organization for Cross-regional Coordination of Transmission Operators have drawn up plans to double the nation’s interregional power grid capacity by linking the northern and southern islands of Hokkaido and Kyushu to the main island of Honshu and expanding connections between other regions. Details are expected to be announced later this month.

This should provide long-term support for Nissin Electric and other makers of electric power equipment. In the meantime, Nissin’s power equipment, ion implant and other businesses are rebounding from the COVID downturn. 

Projected valuations indicate 30% potential upside.


Before it’s here, it’s on Smartkarma

Industrials: Grab, Hanwha Systems Co Ltd and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Grab: SOTP Suggests Steep Discount to Proposed SPAC Valuation
  • Hanwha Systems Rights Offer: Outright Trade on Subs Rights Ahead of Ex-Rights

Grab: SOTP Suggests Steep Discount to Proposed SPAC Valuation

By Shifara Samsudeen, ACMA, CGMA

The ride-hailing giant Grab (0967655D SP) announced on Tuesday (13th April 2021) that it plans to go public in the US via a SPAC merger with Altimeter Growth Corp (AGC US)  at a proposed valuation (pro-forma) of approx. US$39.6bn.

In our previous insight on Grab’s SPAC deal, we discussed the company’s growth prospects and its financials. In this insight, we examine the company’s valuation using a SOTP.


Hanwha Systems Rights Offer: Outright Trade on Subs Rights Ahead of Ex-Rights

By Sanghyun Park

We are one trading session before the 1st-round pricing for the Hanwha Systems ₩1.2T offers.

The pricing is next Monday, April 19. 

Timetable
Preliminary pricing2021. 4. 19
Ex-rights date2021. 4. 21
Record date2021. 4. 22
Subscription rights trade beginning2021. 5. 13
Subscription rights trade ending2021. 5. 20
Final pricing2021. 5. 31
Listing2021. 6. 23
Source: DART
Pricing
1st roundRP × (1 – 15%) / [1 + (71.39% × 15%)]
– Reference price (RP)Min [Close, Avg (Close, 1W VWAP, 1M VWAP)]
– Reference date2021. 4. 19
Ex-rights base price[RP + (1st × 71.39%)] / (1 + 71.39%)
– Reference price (RP)Previous close
– Reference date2021. 4. 21
2nd roundRP × (1 – 15%)
– Reference price (RP)Min [Close, Avg (Close, 1W VWAP)]
– Reference date2021. 5. 31
FinalMax [Min (1st, 2nd), 3D VWAP × 60%]
– Reference date2021. 5. 31
Discount rate15.00%
Capital increase rate71.39%
Source: DART

As I’m writing this post, the share price is ₩20,150 with a 1W VWAP of ₩20,120 and a 1M VWAP of ₩20,829, giving a preliminary RP of ₩20,150.

The 1st round offering price then arrives at ₩15,500 at a discount rate of 15% and a capital increase of 71.39%.

1st round pricing
Date2021. 4. 19
Previous close₩20,150
1W VWAP₩20,120
1M VWAP₩20,829
– Average₩20,366
Reference price₩20,150
1st round price₩15,500
Source: DART
Ex-rights base price
Date2021. 4. 21
Previous close₩20,150
1st round₩15,500
Ex-rights base price₩18,300
 – % to close-9.41%
Source: KRX KIND

Before it’s here, it’s on Smartkarma

Industrials: Toshiba Corp, LG Corp, Nippon Sheet Glass, Air China Ltd (H) and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Smartkarma Flash Webinar | Toshiba – Change Is Afoot
  • LG Corp Split: Major Shareholder Cross Trading Dynamics
  • Nippon Sheet Glass (5202 JP): Significant Upside Potential Remains
  • Air China (753 HK): Further Evidences of Improving Against China Southern (1055 HK)

Smartkarma Flash Webinar | Toshiba – Change Is Afoot

By Smartkarma Research

In this flash webinar, Travis Lundy and Mio Kato talk through the recent goings-on at Toshiba Corp (6502 JP) and what it means for investors.

The webinar will be hosted on Thursday, 15/April/2021, 4.00pm SGT/HKT.

Travis Lundy has 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money.

Mio Kato has over 15 years of experience looking at Japanese and Asian cyclically driven sectors. He was previously with FrontPoint Partners LP, Arrowhawk Capital Partners, and Uzabase before founding LightStream Research.


LG Corp Split: Major Shareholder Cross Trading Dynamics

By Sanghyun Park

LG Corp continues to fly high. The share price is now only -7.14% from the 52H set on January 7.

LG Corp
Ticker003550
MC (₩B)19,067.6
DTV (₩B)32.3
Close₩110,500
Δ Daily8.87%
Open4.25%
High-4.74%
Low5.24%
x DTV4.18
TV (₩B)164.4
TV/SO0.86%
x Open10.37%p
52WH-7.14%
– Date1/7/21
52WL90.52%
– Date4/16/20
20D SMA20.23%
20D EMA17.09%
120D SMA24.52%
20D Δ24.86%
20D SD6.22%
120D Δ52.41%
120D SD14.30%
180D Δ52.20%
180D SD13.72%
RSI (14)78.89
%K81.61
%D90.99
Source: KRX

The trend will likely stay until the April 29~May 26 trading suspension unless we face a market systematic risk.

Schedule
Trade suspension begins4/29/21
Trade suspensino ends5/26/21
Re-listing5/27/21
Source: DART

Nippon Sheet Glass (5202 JP): Significant Upside Potential Remains

By Scott Foster

  • NSG’s share price has rebounded to its pre-COVID level but is still 44% below its 2018 high.
  • Demand for architectural, automotive and speciality glass is on the rebound. Year-on-year sales and operating profit comparisons have turned or are turning positive.
  • As business returns to normal, projected valuations suggest 30% to 50% potential upside.

Air China (753 HK): Further Evidences of Improving Against China Southern (1055 HK)

By Osbert Tang, CFA

While the Mar traffic figures continued to show that Air China Ltd (H) (753 HK) is still lagging behind China Southern Airlines (1055 HK) in many areas, there is no doubt that such underperformance is reducing sequentially. The latest figures show that Air China is narrowing its gap on passenger load factor, seeing rebound in international passenger traffic, registering better cargo and mail strengths and catching up on freight and overall load factors.

We believe many of these attributes fit well into our arguments for a reversal of CSA’s outperformance against Air China in this year as we written in 2021 High Conviction: Pair Trade – Long Air China (753 HK), Short China Southern (1055 HK). The relative valuation also suggests CSA is richly valued against Air China. For details, please refer to our attached update presentation file on the trade. 


Before it’s here, it’s on Smartkarma

Industrials: Toshiba Corp, Grab, TuSimple Holdings Inc, Tess Holdings Co Ltd and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Toshiba – The King Is Dead, Long Live the King
  • SPAC Grab … At 2x Uber
  • Grab Goes Public: Expanding Top Line but No Profits; Proposed Valuation Seems Excessively Ambitious
  • Toshiba Corp (6502 JP) Chapter 1: CEO Out, Activists up the Game
  • TuSimple IPO – Simply a Better Solution for the U.S Trucking Industry
  • Tess Holdings IPO – Valuation

Toshiba – The King Is Dead, Long Live the King

By Travis Lundy

That famous phrase is not internally contradictory. It announces the death of the late monarch, and announces the ascension of the new monarch to replace him. 

A flurry of articles late last night Japan time – some of them referenced in a few discussion points posted to the most recent insight Gaming Out a CVC Bid for Toshiba – The Right Noises, The Wrong Price, and Toast and others said that Kurumatani-san was going to be dismissed, or resign, at an extraordinary board meeting to be held on the 14th of April. 

The various articles were more or less revealing depending on how much the masthead represents Japan as Japan Inc would have itself represented. Articles from institutions with a more neutral/critical eye were more forthcoming about the turmoil under the surface. 

The phrases from the former were on the order of “it became inevitable that Kurumatani-san would have to resign.” The FT suggested one board member would put forth a motion to dismiss him after the CVC approach last week threw senior management into “civil war.”

Later versions suggested Kurumatani-san would himself resign at the beginning of a meeting, which would forestall an effort to boot him (The King is Dead). Toshiba’s exchange release this morning in response to press coverage all but confirms it.

If Kurumatani-san is going to fall on his sword because of the CVC conflict (and the idea that by getting CVC to bid to distract from the other things going on, he was somehow entrenching himself in ways not befitting Toshiba adherence to the spirit of the Corporate Governance Code), one would expect Fujimori-san may resign as well. 

All the stories suggest the current Chairman and former CEO Tsunakawa-san would take the reins (Long Live the King!) but despite Tsunakawa-san being on friendlier terms with some of the activists, the Board needs to find someone else. I expect there would be shareholder pressure to have that person come from without, but Toshiba is a sensitive asset and there could be considerable pressure to have that person come from within, or if from without, from within the Keidanren. I think investors need to prepare themselves for the possibility that the replacement for Tsunakawa-san may not be the CEO Toshiba needs either, but that may be jumping the gun.

The result is not dissimilar to what Mio Kato and I had suggested was inevitable, but the speed of the unwind may catch people by surprise. I expect that the news reports of the internal survey conducted by the Nomination Committee which showed a majority of senior executives distrusted Kurumatani-san will be viewed as the tipping point…

But investors should note that the results of that survey were known in March, conveyed to Kurumatani-san at end-March, and the Board knew it at end-March – before the CVC bid. The results of that survey were not enough to ask for his head at the time unless the CVC bid was well-and-truly concocted by CVC and Kurumatani-san himself as a way to maintain power. If that is the case, CVC needs to get out in front of it, by being very public in refuting that, and continuing with a bid, even if they bid to lose. 

This whole situation, as I suggested last week, is getting interestinger

And we have toast. Officially, before I even finished this piece, Toshiba is out with a press release saying Kurumatani-san is out and Tsunakawa-san is in. It’s pretty spare, but there is a news conference after the close.

NOW we look at what comes next. With KKR and Brookfield potential bids, and more details about CVC intentions overnight, it’s worth looking at structure. So there’s more below the fold.


SPAC Grab … At 2x Uber

By David Blennerhassett

Priced at ~2x Uber on a forward EV/Revenue metric.

That was my immediate takeaway from Grab (0967655D SP)‘s announcement it intends to go public in the U.S. in partnership with SPAC Altimeter Growth Corp (AGC US)

The proposed transaction represents an expected equity value of US$39.55bn and EV of US$30.36bn, with cash proceeds of US$4.54bn.

In past insights on SPACs, beginning with Virtual IPOs/Direct Listings: Uninhibited Price Discovery, one issue for SPACs is their overabundance in the market today, targeting popular private companies. As such, popular private companies can tee up “SPAC-offs,” where various SPACs pitch their deal, competing (mostly) on price.  The higher the acquisition price, the lower the future return for SPAC investors.

And Grab has competition. Its main rival is Indonesia’s Gojek (1379371D IJ), and the two courted each other around February last year before irreconcilable differences led to them parting ways in January this year.

There is talk Gojek will merge with e-commerce payer Tokopedia and similarly seek a US listing.

Mobile gaming and online shopping platform player Sea Ltd (SE US) is also in the mix, and currently boasts a non-insignificant market cap of US$125bn.

The merger is slated for closing in July this year.

More below the fold.


Grab Goes Public: Expanding Top Line but No Profits; Proposed Valuation Seems Excessively Ambitious

By Shifara Samsudeen, ACMA, CGMA

The ride-hailing giant Grab (0967655D SP)  announced on Tuesday (13th April 2021) that it plans to go public in the US via a SPAC merger with Altimeter Growth Corp (AGC US)  at a proposed valuation (pro-forma) of approx. US$39.6bn.

As per the proposed transaction, Altimeter Growth and Grab will become wholly-owned subsidiaries of a new holding company and the combined company will have an equity-value of approx. US$39.6bn on a pro-forma basis.

Grab will receive about US$4.5bn in cash, including more than US$4.0bn from a fully committed PIPE (private investment in public equity arrangement) offering that will be managed by BlackRock, Counterpoint Global, T.Rowe Price Associates, Fidelity International, Fidelity Management and Research, Mubadala, Temasek and several others.

Source: Company disclosures

Altimeter Capital has committed to US$750m to the PIPE Financing and also also has committed to a 3-year lock-up period for its sponsor promote shares offering investors confidence over Grab’s future prospects.


Toshiba Corp (6502 JP) Chapter 1: CEO Out, Activists up the Game

By David Lepper

The fact is that Toshiba is now in play for privatisation with the CEO out and one of the more prominent activists citing their position and desired starting valuation. However, this is likely to be far from a linear trajectory to its end chapter. It will likely remain a fast-moving situation – as we write this note, the landscape has evolved almost on an hourly basis – and we do not expect it to slow in the next few weeks. As we stand at the time of publishing, there are several summary points to consider, particularly as we leave the Introduction phase of this story and proceed to embark on Chapter One of our fourth theme in 2021’s activist landscape. 


TuSimple IPO – Simply a Better Solution for the U.S Trucking Industry

By Mio Kato

TuSimple has partnered with a variety of leading truck manufacturers and aims to commercialise level 4 autonomous driving technology for freight trucking. While the business is still at a very early stage, the prospects for the company if its technology does what it claims, are very strong.


Tess Holdings IPO – Valuation

By Mio Kato

Tess Holdings offers an interesting play on the developing solar and renewables theme in Japan which has done very well over the last twelve months. Prospects appear positive and the stock looks reasonable on a PE basis, so the question is how to interpret the high levels of leverage.


Before it’s here, it’s on Smartkarma

Industrials: Toshiba Corp, Grab, Tess Holdings Co Ltd, Zhejiang Cangnan Instrument, Hyundai Engineering Co Ltd and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Toshiba Corp (6502 JP) – And so It Begins
  • Grab SPAC Listing – High on Ambition, Very High on Valuation
  • Toshiba – How the Kurumatani Resignation and KKR or Brookfield Bids Could Change Things
  • Tess Holdings IPO – A Timely Renewables Play
  • Zhejiang Cangnan (1743 HK): H-Share Buyback
  • Hyundai Engineering IPO Process Begins – A Key Catalyst for the Hyundai Motor Group Restructuring?

Toshiba Corp (6502 JP) – And so It Begins

By David Lepper

As of last week, the Nikkei Newspaper reported The US$20 billion buyout offer for Toshiba by U.K. investment firm CVC Capital Partners. This confirmed our view that we shall see an increasing number of Private Equity Managers start to use its dry powder in more significant ways to create and lobby for corporate change, thereby assuming their activism role. We discuss valuation, the key items which must occur for traditional activists to accept this transaction as well as the chances of a competing bid amongst other items. We specifically examine why management is going to have to declare their position and interests, in the coming days to ensure a clear and efficient. Failure to do so is likely to see them out of office ahead of this transaction even having the chance to be successful.


Grab SPAC Listing – High on Ambition, Very High on Valuation

By Sumeet Singh

On 13th Apr 2021, Grab (0967655D SP) announced that it plans to go public in the US in partnership with Altimeter Growth Corp (AGC US) at an equity valuation of US$39.6bn. It will raise around US$4.5bn cash through the transaction. 

In this note, I’ll take a quick look at the numbers and implied valuations.


Toshiba – How the Kurumatani Resignation and KKR or Brookfield Bids Could Change Things

By Mio Kato

The news flow cycle for Toshiba kicked up again overnight as Travis has pointed out. As Travis and I have suggested would happen, Kurumatani is out and other PE funds have started to circle. The initial reaction here should be positive given that it has been reported that KKR is contemplating a higher bid, however, the long-term outlook becomes a little more complex.


Tess Holdings IPO – A Timely Renewables Play

By Mio Kato

Tess Holdings offers relatively pure play leverage into Japan’s developing cogeneration and especially solar energy markets at a time when there is increasing news flow in the area. With a business model covering the full chain from land procurement, regulatory approvals, construction, operation and maintenance and asset management, the company offers a one-stop-shop in the area. There are thus many positives, though the debt levels are a slight concern.


Zhejiang Cangnan (1743 HK): H-Share Buyback

By David Blennerhassett

Back on the 5 February, gas meter manufacturer Zhejiang Cangnan Instrument (1743 HK)  announced the board of directors had resolved to repurchase all the issued H shares in the company at a minimum price of HK$22.00/share, a 15.18% premium to last close. The buyback was subject to approval from the local bureau of the State Administration of Foreign Exchange.

This was followed by a conditional cash offer on the 12 March. The Offer is a “Merger by Absorption”, incorporating a Scheme-like vote (≥ 75% for, ≤10% against); and a tendering condition of 90%. All H-shares are subject to the buy-back and the effective tendering % is 90%.

The Offer Document has been despatched with the IFA concluding the Offer price to be fair and reasonable.

The EGM will take place on the 17 May and the first closing date is the 31 May.

Trading at a gross/annualised spread of 7.3%/57.2%. But the thorny issue is the 90% tendering condition.

More below the fold.


Hyundai Engineering IPO Process Begins – A Key Catalyst for the Hyundai Motor Group Restructuring?

By Douglas Kim

Hyundai Engineering Co is starting its IPO process, which was noted by several local Korean media accounts today. The local media also has mentioned that the value of Hyundai Engineering Co (HEC) could be about 10 trillion won ($8.9 billion).

Hyundai Engineering Co Ltd (HEC KS) is expected to complete its IPO by the end of 2021. It was reported on 13 April by the local media that Hyundai Engineering Co sent request for proposals (RFP) for IPO to the major domestic investment banks (including Mirae Asset Securities, Korea Investment & Securities, NH Investment & Securities, and other foreign banks) on 9 April. 

A successful IPO of Hyundai Engineering Co could accelerate the restructuring of the entire Hyundai Motor Group. For example, given that the Hyundai Motor Group Chairman Chung Eui-Sun is the second largest shareholder of Hyundai Engineering Co, the IPO proceeds from this company could be used to further increase the ownership of Hyundai Mobis (012330 KS) in the future.

Note: Hyundai Engineering Co (HEC) is a different company than Hyundai Engineering & Const (000720 KS) (Hyundai E&C). In this insight, the former company is mentioned as either HEC or Hyundai Engineering Co. 


Before it’s here, it’s on Smartkarma

Industrials: Toshiba Corp, Jardine Matheson Holdings, Airports of Thailand, ACS, Actividades de Construcción y Servicios and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Gaming Out a CVC Bid for Toshiba – The Right Noises, The Wrong Price, and Toast
  • Jardine Matheson: Strategic Buyout Done
  • Airport of Thailand (AOT): 3rd Wave Is a Charm
  • Atlantia – CDP – ACS: Moving Parts in the Acquisition of ASPI

Gaming Out a CVC Bid for Toshiba – The Right Noises, The Wrong Price, and Toast

By Travis Lundy

Things are heating up.

Some might say after today that Kurumatani-san is on the hot seat feeling considerably toasty.

Over the weekend, there were more noises as the Nikkei reported that Toshiba would “take the CVC bid seriously”, had set up an internal review committee to be chaired by a Vice President, and that the approvals would be expected by early summer, a Tender Offer would start in July, and if successful, Toshiba would be delisted in October. 

This morning there is a report that the large increase in position by Singapore-based (and as the Nikkei describes them “noisy shareholder” 3D Investment Partners reported in the previous insight was in fact 3D purchasing the stake from Harvard Investment Management. This is important because 3D voted against Kurumatani-san last year as director and later asked the firm to investigate vote-counting irregularities. Harvard,  with 4.7%, abstained, reportedly after former GPIF CIO Hiromichi Mizuno – champion of governance and stewardship while at GPIF and then-special advisor to METI – communicated with Harvard and voiced the possibility that if they voted against Kurumatani-san there could be a probe based on the idea that if shareholders coordinate to vote without declaring joint ownership, there can be issues (Reuters report, FT article).

Now there appears to be no issue of a Harvard abstention and clear increase in voting power for shares held by those who would challenge management (with or without Kurumatani-san) on capital and management policy, but to be clear, votes FOR are measured as a percentage of votes PLUS active abstentions. If Harvard actively abstained (rather than passively not voting), then this won’t change the support ratio (it would just change the optics). IF the 21.4mm share position moved from passive abstention to active opposition, it would have lowered the votes FOR from 57.98% to 54.46%, but Kurumatani-san would have squeaked through still. 

The entire situation is great fun. The situation of Toshiba governance has become something of a governance nightmare and with national security issues at stake for a minority of the business, a potential bureaucratic quagmire. But the company is doing decently well, and is long a desirable asset, and there are LOTS of shareholders who are heavily vested in seeing this through. And it appears with the March EGM result that they have a majority. 

Sitting in the audience, it makes me want to have a squirt gun, rubber gloves, rice, newspaper, and toast. Gotta have toast. 


Jardine Matheson: Strategic Buyout Done

By David Blennerhassett

Jardine Strategic Holdings (JS SP)‘s special general meeting (SGM) was held a short while ago in Bermuda. The vote was a foregone conclusion, given Jardine Matheson Holdings (JM SP)‘s ability to vote its 84.9% stake.

The resolution as set out in the Notice of Special General Meeting contained in the Circular to shareholders on 18 March 2021 was duly passed.

92% of shareholders voted for the resolution. It is not clear from this link if that is 92% of shareholders present and via proxy, or 92% of outstanding shares.

This is useful in knowing the level of dissension.

More below the fold.


Airport of Thailand (AOT): 3rd Wave Is a Charm

By Henry Soediarko

Due to the worsening COVID-19 conditions in Thailand, investors may sell off Airport of Thailand’s share in the coming months although the long-term prospect remains solid; global inoculation is on the way and governments around the world keep tinkering with the travel bubble that helps to provide more ideas on how to restart travel, mainly in safe entry and quarantine protocols. 

Therefore, investors should take advantage of the potential sell-off in Airports of Thailand (AOT TB) to add and should benefit later when travel recovers. Third Wave is a Charm.


Atlantia – CDP – ACS: Moving Parts in the Acquisition of ASPI

By Jesus Rodriguez Aguilar

ACS enters the bid for Autostrade with an offer of €10 bn (4.5x 2019 EBITDA), above the €9.1 offered by the CNP consortium.

  • Both offers are within the range considered by the market €9 bn –  €11 bn, although below the €12 bn that Atlantia believes ASPI is worth.
  • The activist fund TCI, which has 10% of Atlantia argues that the value of ASPI ranges between €11 bn and €12 bn.

Assuming that ACS participates in the acquisition of ASPI by contributing funds equivalent to a percentage of the value of ASPI (88%) similar to its stake in Abertis (30% though ACS and 20% through Hochtief), and assuming a €10 bn valuation (for 100%), the investment would amount to c. €4 bn (vs. c. €5 bn in cash that ACS would receive in Q4 2021 from the industrial services disposal).

  • Proforma net debt/EBITDA above 2x, although CF would gain in visibility and stability, assuming that ACS does not use the proceeds to reduce leverage.
  • Dividends upstreamed to ACS via a potential Abertis/ASPI would increase its FCF (and therefore its dividend payout potential). Depending on how the deal is structured, it could add c. €500 mn to ACS’s FCF.

That said, details on the possible economic offer and the structure of the operation are very limited, therefore it seems difficult to evaluate the impact on TP.

ACS has a 2021e 7% dividend yield (forecasted dividend of €1.93, source Capital IQ consensus), funded by Hochtief and Abertis, so it does not seem at risk. But if the ASPI operation succeeds, ACS will become an infrastructure focused company. Pension funds would be willing to acquire its shares up to a price where dividend yield reaches around 3%, thus meaning a substantial re-rating of ACS.

From my SOTP valuation, on conservative assumptions, there is a 15% upside to ACS, with the optionality of a deal to acquire ASPI as part of a consortium. Recommendation is long ACS, TP €32.6.


Before it’s here, it’s on Smartkarma

Industrials: DL Co Ltd and more

By | Daily Briefs, Industrials

In today’s briefing:

  • KOSPI Short Int & Loan Balance: Trend/Flow & Stocks on Move (Feat. DL Holdings)

KOSPI Short Int & Loan Balance: Trend/Flow & Stocks on Move (Feat. DL Holdings)

By Sanghyun Park

Top 20 short interests: holders & weekly gainers/decliners

Lotte Tour continues to top the list as 6.69% of the SO sits in the short interests, followed by Doosan Infracore at 3.53%, Hotel Shilla at 2.96%, and Celltrion at 2.90%.

Among them, Doosan Infracore and Celltrion have fallen 5.48% and 6.84% WoW, respectively.

As a %p of the SO, the gainers include Jooyon Tech, Noroo Paint, Sunchang, and Gene One Life. The decliners are Hyundai BNG, Samsung Pharm, Tong Yang Mooslan, and Celltrion.

Top 20 short interestTickerK200Apr 7 Short1M1W1W %pApr 9 Loan1M1W1W %p
Lotte Tour Development Co., Ltd.0323501536.69%2.52%0.39%0.03%p8.10%-46.13%2.15%0.17%p
Doosan Infracore Co Ltd042670983.53%-17.90%-5.48%-0.20%p9.24%-52.01%-0.59%-0.06%p
Hotel Shilla Co Ltd008770632.96%-1.53%-0.16%0.00%p8.34%-9.24%-0.74%-0.06%p
Celltrion, Inc.06827052.90%-18.76%-6.84%-0.21%p7.87%4.23%-5.19%-0.43%p
Inscobee Inc006490#N/A2.23%6.08%0.79%0.02%p3.55%-36.46%-0.49%-0.02%p
Hanatour Service Inc039130#N/A2.09%15.68%4.68%0.09%p4.20%-35.24%0.94%0.04%p
Ssangyong Motor Co., Ltd.003620#N/A1.46%0.00%0.00%0.00%p1.75%-30.10%0.16%0.00%p
LG Display Co Ltd034220411.40%-11.22%2.10%0.03%p5.24%-38.96%3.85%0.19%p
Samsung Heavy Industries Co.,Ltd010140541.37%-15.17%6.02%0.08%p4.85%-34.59%-4.10%-0.21%p
Sunny Electronics Co Ltd004770#N/A1.30%-22.38%-3.90%-0.05%p2.96%-33.78%3.84%0.11%p
Paik Kwang Industral Co Ltd001340#N/A1.23%6.80%-8.26%-0.11%p2.38%-29.44%0.09%0.00%p
E Kocref CR-REIT088260#N/A1.19%0.00%0.00%0.00%p2.92%-25.07%7.38%0.20%p
Daewoo Electronic Components Co Ltd009320#N/A1.12%0.02%-0.04%0.00%p1.89%-37.26%4.18%0.08%p
Tongyang Inc001520#N/A1.08%-0.25%-0.89%-0.01%p2.19%-0.70%10.21%0.20%p
Shinsung Tongsang Co., Ltd005390#N/A1.06%9.35%7.57%0.07%p1.85%-23.56%-0.18%0.00%p
Korea Shipbuilding &Offshore Engn Co Ltd009540361.05%4.65%-0.29%0.00%p2.60%-25.98%3.63%0.09%p
Willbes & Co Ltd008600#N/A0.98%-15.82%-14.09%-0.16%p1.67%-4.05%-0.16%0.00%p
ENPlus Co Ltd074610#N/A0.98%20.64%0.01%0.00%p1.96%-25.21%1.11%0.02%p
Monami Co Ltd005360#N/A0.98%28.72%-0.61%-0.01%p1.98%-40.06%0.15%0.00%p
SBW102280#N/A0.95%-3.36%0.08%0.00%p1.55%-31.10%0.00%0.00%p
Source: KRX & KOFIA
Top 20 short interest gainersTickerK200Apr 7 Short1M1W1W %pApr 9 Loan1M1W1W %p
Jooyon Tech Co Ltd044380#N/A0.59%39.10%139.30%0.35%p1.15%-49.81%-4.77%-0.06%
Noroo Paint & Coatings Co Ltd090350#N/A0.30%#DIV/0!122.48%0.17%p1.48%-22.71%1.74%0.03%
Sunchang Corp002820#N/A0.16%#DIV/0!#DIV/0!0.16%p0.56%-51.04%0.00%0.00%
Gene One Life Science Inc011000#N/A0.15%-43.30%#DIV/0!0.15%p0.66%-44.14%24.40%0.13%
Hansol Logistics Co Ltd009180#N/A0.71%3.56%24.45%0.14%p2.42%-33.84%-4.29%-0.11%
Wooridul Huebrain Ltd118000#N/A0.59%6.74%28.68%0.13%p0.87%-43.30%10.77%0.08%
SK Gas Ltd.018670#N/A0.20%#DIV/0!191.56%0.13%p1.43%79.31%-50.69%-1.47%
Union Corp000910#N/A0.12%#DIV/0!#DIV/0!0.12%p0.51%-48.97%0.00%0.00%
Haein Corporation003010#N/A0.52%#DIV/0!28.02%0.11%p1.44%-15.40%-1.61%-0.02%
KEPCO Engineering & Construction Co Inc0526901910.65%11.16%20.06%0.11%p1.37%126.46%0.41%0.01%
Camus Engineering & Construction Inc013700#N/A0.10%-20.33%#DIV/0!0.10%p0.46%-38.64%-36.11%-0.26%
Hanatour Service Inc039130#N/A2.09%15.68%4.68%0.09%p4.20%-35.24%0.94%0.04%
Daelim B&Co Co Ltd005750#N/A0.09%#DIV/0!#DIV/0!0.09%p0.37%-30.41%23.85%0.07%
Sangsangin Investment & Securities CoLtd001290#N/A0.09%#DIV/0!#DIV/0!0.09%p0.21%10.33%-2.06%0.00%
Kolon Industries Inc1201101400.18%59.72%78.57%0.08%p2.77%-14.86%-4.00%-0.12%
Hyungji Elite Inc093240#N/A0.18%70.45%74.81%0.08%p0.50%-45.22%1.52%0.01%
Cosmax Inc1928201440.43%-10.80%22.16%0.08%p2.45%-86.54%-25.21%-0.83%
Samsung Heavy Industries Co.,Ltd010140541.37%-15.17%6.02%0.08%p4.85%-34.59%-4.10%-0.21%
Woori Investment Bank Co Ltd010050#N/A0.24%16.28%46.74%0.08%p0.59%-19.06%0.79%0.00%
Seoyon Co Ltd007860#N/A0.15%-71.04%102.92%0.08%p0.32%-94.35%0.00%0.00%
Source: KRX & KOFIA
Top 20 short interest declinersTickerK200Apr 7 Short1M1W1W %pApr 9 Loan1M1W1W %p
Hyundai BNG Steel Co Ltd004560#N/A0.24%-59.31%-59.64%-0.36%p1.52%-16.81%20.46%0.26%
Samsung Pharm Co Ltd001360#N/A0.58%-41.18%-30.23%-0.25%p2.76%-41.31%2.87%0.08%
Tong Yang Moolsan Co Ltd002900#N/A0.50%-49.21%-31.96%-0.24%p1.80%-26.96%-2.17%-0.04%
Celltrion, Inc.06827052.90%-18.76%-6.84%-0.21%p7.87%4.23%-5.19%-0.43%
Feelux Co Ltd033180#N/A0.52%-6.37%-28.31%-0.21%p0.98%-28.01%0.26%0.00%
Doosan Infracore Co Ltd042670983.53%-17.90%-5.48%-0.20%p9.24%-52.01%-0.59%-0.06%
Taeyang Metal Industrial Co., Ltd.004100#N/A0.00%#DIV/0!-100.00%-0.18%p0.51%-29.75%0.80%0.00%
Bumyang Construction Co Ltd002410#N/A0.00%#DIV/0!-100.00%-0.17%p0.77%-42.12%3.60%0.03%
Willbes & Co Ltd008600#N/A0.98%-15.82%-14.09%-0.16%p1.67%-4.05%-0.16%0.00%
DSR Corp155660#N/A0.00%#DIV/0!-100.00%-0.15%p0.75%-35.86%1.00%0.01%
Daechang Co Ltd012800#N/A0.61%-53.89%-19.53%-0.15%p2.18%-2.11%0.46%0.01%
Samsung Biologics Co Ltd207940180.37%-34.36%-27.37%-0.14%p1.67%-30.70%-6.99%-0.13%
Daeyoung Packaging Co., Ltd.014160#N/A0.42%-10.53%-23.90%-0.13%p1.12%-27.80%-1.63%-0.02%
Intergis Co Ltd129260#N/A0.00%-100.00%-100.00%-0.13%p0.41%-19.99%1.41%0.01%
Comtec Systems Co., Ltd.031820#N/A0.27%-29.95%-30.94%-0.12%p0.85%-45.37%-7.97%-0.07%
DY Power Corp210540#N/A0.16%-45.22%-42.59%-0.12%p0.60%-50.06%0.41%0.00%
Seoul Food Industrial Co Ltd004410#N/A0.46%-17.05%-20.72%-0.12%p0.96%-38.40%-3.44%-0.03%
Paik Kwang Industral Co Ltd001340#N/A1.23%6.80%-8.26%-0.11%p2.38%-29.44%0.09%0.00%
Hyundai Pharmaceutical Co Ltd004310#N/A0.52%-13.27%-15.75%-0.10%p1.09%-43.29%0.05%0.00%
Orient Bio Inc002630#N/A0.22%-26.60%-29.27%-0.09%p0.57%-38.47%-1.45%-0.01%
Source: KRX & KOFIA

Top 20 loan balance: holders & weekly gainers/decliners

Loan balance should be a leading indicator, relative to short interests.

DL Holdings tops the list as 13.99% of the shares are currently being loaned. Doosan Infracore and Hotel Shilla follow DL Holdings, but both of them continue to be on the decline MoM. Lotte Tour gained a bit last week but is still at a 46.13% drop over the last month.

As a %p of the SO, the gainers are GS Retail (+1.00%p), Samwha Capacitor (+0.91%p), & KCTech (+089%p). The decliners include LG HAUSYS (-1.77%p), SK Gas (-1.47%p), and DL E&C (-1.18%p).

Top 20 loan balanceTickerK200Apr 7 Short1M1W1W %pApr 9 Loan1M1W1W %p
DL Holdings Co Ltd000210700.08%0.84%17.50%0.01%p13.99%17.60%-3.15%-0.45%p
Doosan Infracore Co Ltd042670983.53%-17.90%-5.48%-0.20%p9.24%-52.01%-0.59%-0.06%p
Hotel Shilla Co Ltd008770632.96%-1.53%-0.16%0.00%p8.34%-9.24%-0.74%-0.06%p
Kyeryong Construction Industrial Co.013580#N/A0.26%-90.45%0.00%0.00%p8.15%6.73%-0.56%-0.05%p
Lotte Tour Development Co., Ltd.0323501536.69%2.52%0.39%0.03%p8.10%-46.13%2.15%0.17%p
Celltrion, Inc.06827052.90%-18.76%-6.84%-0.21%p7.87%4.23%-5.19%-0.43%p
NS Shopping Co Ltd138250#N/A0.05%9.48%0.00%0.00%p6.79%1.66%-0.49%-0.03%p
GS Retail Co Ltd0070701240.09%3.56%10.10%0.01%p5.90%30.95%20.53%1.00%p
Doosan Heavy Industries Constrctn Co Ltd034020610.52%22.62%1.41%0.01%p5.77%2292.48%8.66%0.46%p
LG Display Co Ltd034220411.40%-11.22%2.10%0.03%p5.24%-38.96%3.85%0.19%p
Hanshin Construction Co., Ltd.004960#N/A0.20%0.00%0.00%0.00%p5.13%3.72%0.00%0.00%p
Kolmar Korea Co Ltd1618901350.16%49.13%4.84%0.01%p5.05%28.26%-1.47%-0.08%p
Samsung Heavy Industries Co.,Ltd010140541.37%-15.17%6.02%0.08%p4.85%-34.59%-4.10%-0.21%p
Cuckoo Homesys Co Ltd2847401900.18%-28.26%-4.01%-0.01%p4.83%41.47%-5.03%-0.26%p
Green Cross Holdings Preference Shares005257#N/A0.00%-100.00%#DIV/0!0.00%p4.75%-0.15%0.00%0.00%p
LG Chem Ltd05191040.26%8.37%0.85%0.00%p4.57%9.03%0.30%0.01%p
Netmarble Corp251270260.66%1126.86%2.29%0.01%p4.34%-18.30%9.85%0.39%p
LG Innotek Co., Ltd.011070680.37%4.66%5.60%0.02%p4.25%190.05%20.29%0.72%p
Hanatour Service Inc039130#N/A2.09%15.68%4.68%0.09%p4.20%-35.24%0.94%0.04%p
Sunjin Co Ltd136490#N/A0.10%-0.94%0.39%0.00%p4.07%2.81%3.29%0.13%p
Source: KRX & KOFIA
Top 20 loan balance gainersTickerK200Apr 7 Short1M1W1W %pApr 9 Loan1M1W1W %p
GS Retail Co Ltd0070701240.09%3.56%10.10%0.01%5.90%30.95%20.53%1.00%p
Samwha Capacitor Co Ltd001820#N/A0.52%-9.05%10.01%0.05%2.24%32.24%68.42%0.91%p
KCTech Co Ltd281820#N/A0.00%#DIV/0!#DIV/0!0.00%1.24%260.48%249.45%0.89%p
Lotte Fine Chemical Co Ltd0040001140.06%-27.69%-11.29%-0.01%1.93%316.83%66.00%0.77%p
LG Innotek Co., Ltd.011070680.37%4.66%5.60%0.02%4.25%190.05%20.29%0.72%p
Doosan Heavy Industries Constrctn Co Ltd034020610.52%22.62%1.41%0.01%5.77%2292.48%8.66%0.46%p
Netmarble Corp251270260.66%1126.86%2.29%0.01%4.34%-18.30%9.85%0.39%p
Sungmoon Electronics Co Ltd014910#N/A0.00%#DIV/0!#DIV/0!0.00%1.45%97.51%36.11%0.38%p
NK Mulsan Co Ltd009810#N/A0.00%#DIV/0!#DIV/0!0.00%2.25%120.48%20.51%0.38%p
HMM Co Ltd011200420.09%-9.74%11.32%0.01%3.52%-47.90%11.22%0.35%p
NCSoft Corp036570110.33%-5.16%2.89%0.01%2.27%-2.19%17.10%0.33%p
Kolon Corp Preference Shares002025#N/A0.00%#DIV/0!#DIV/0!0.00%1.29%-37.05%33.79%0.33%p
LG International Corp0011201510.27%-6.26%3.44%0.01%2.65%-3.71%12.86%0.30%p
Tae Young Engineering&Constructin Co Ltd0094101890.06%-55.37%3.72%0.00%1.25%30.00%29.26%0.28%p
Shinpoong Paper MFG Co Ltd002870#N/A0.00%#DIV/0!#DIV/0!0.00%0.47%311.90%123.41%0.26%p
Hyundai BNG Steel Co Ltd004560#N/A0.24%-59.31%-59.64%-0.36%1.52%-16.81%20.46%0.26%p
Uni CHEM Co., Ltd.011330#N/A0.00%-100.00%#DIV/0!0.00%1.17%-18.02%24.08%0.23%p
Daishin Securities Co., Ltd003540#N/A0.22%-29.16%-8.35%-0.02%2.00%-9.52%11.71%0.21%p
Tongyang Inc001520#N/A1.08%-0.25%-0.89%-0.01%2.19%-0.70%10.21%0.20%p
E Kocref CR-REIT088260#N/A1.19%0.00%0.00%0.00%2.92%-25.07%7.38%0.20%p
Source: KRX & KOFIA
Top 20 loan balance declinersTickerK200Apr 7 Short1M1W1W %pApr 9 Loan1M1W1W %p
LG HAUSYS, LTD.1086701680.16%-20.57%-10.00%-0.02%2.08%-82.75%-46.03%-1.77%p
SK Gas Ltd.018670#N/A0.20%#DIV/0!191.56%0.13%1.43%79.31%-50.69%-1.47%p
DL E&C Ord Shs375500#N/A0.05%-7.09%30.68%0.01%1.73%-39.33%-40.40%-1.18%p
Sungshin Cement Co Ltd004980#N/A0.48%-0.06%0.80%0.00%0.92%-54.05%-48.23%-0.86%p
Cosmax Inc1928201440.43%-10.80%22.16%0.08%2.45%-86.54%-25.21%-0.83%p
Hana Financial Group Inc086790220.26%-16.65%-12.31%-0.04%2.74%-31.64%-18.43%-0.62%p
Hyundai Heavy Industries Holdings Co Ltd267250660.17%-41.32%-3.03%-0.01%1.27%39.99%-30.38%-0.55%p
DL Holdings Co Ltd000210700.08%0.84%17.50%0.01%13.99%17.60%-3.15%-0.45%p
Jahwa Electronics Co Ltd033240#N/A0.20%0.41%0.00%0.00%3.85%-38.52%-10.31%-0.44%p
Hanmi Semiconductor Co Ltd042700#N/A0.13%-0.94%-11.91%-0.02%1.14%-20.64%-27.87%-0.44%p
Celltrion, Inc.06827052.90%-18.76%-6.84%-0.21%7.87%4.23%-5.19%-0.43%p
SK Hynix Inc00066030.07%10880.52%-22.19%-0.02%3.17%7.33%-11.72%-0.42%p
Huneed Technologies005870#N/A0.09%#DIV/0!-0.97%0.00%0.46%-68.16%-46.13%-0.39%p
Hyundai Motor S1 Pref Shs005385#N/A0.01%-22.76%-7.30%0.00%0.82%-32.44%-31.53%-0.38%p
F&F Co., Ltd0077001610.06%-31.02%26.97%0.01%2.93%-20.87%-10.58%-0.35%p
SK Chemicals Co Ltd285130560.04%-27.68%27.51%0.01%1.40%-41.78%-18.58%-0.32%p
Hanshin Machinery Co Ltd011700#N/A0.34%0.00%0.00%0.00%1.35%-29.65%-18.52%-0.31%p
Daesung Holdings Co Ltd016710#N/A0.00%#DIV/0!#DIV/0!0.00%0.54%-28.19%-36.10%-0.31%p
Cs Wind Corp1126101210.06%-30.58%25.81%0.01%0.82%9.23%-26.58%-0.30%p
Dongkuk Steel Mill Co., Ltd0012301570.09%8.86%10.15%0.01%1.25%-25.61%-17.63%-0.27%p
Source: KRX & KOFIA

Before it’s here, it’s on Smartkarma

Industrials: Zoomlion Heavy Industry H, Hitachi Ltd and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Zoomlion (1157.HK): Buy on Flow Through of Construction Strength into Late Cycle Products
  • Hitachi Ltd. (6501 JP): Buys Kyoto Robotics, Plans to Sell Hitachi Metals

Zoomlion (1157.HK): Buy on Flow Through of Construction Strength into Late Cycle Products

By Victoria Li

We expect sales growths of late cycle products in construction machinery remain robust this year. 2021E sales growth of excavator (the main early cycle product) might beat market expectation and be as strong as 2020 levels, vs. market expected 10% yoy. In March, China’s excavator sales grew by 60% yoy to 79,035 units, much stronger than market expected.

Zoomlion, as the leading manufacturer with dominant market shares of late cycle products, would benefit from strong market demand on concrete machines and cranes in domestic market and further market expanding in One Belt One Road regions. In excavator segment, Zoomlion is gaining market share quickly. All the above would secure the company’s earnings grow solid in 2021-2022E.

Zoomlion’s valuation remains attractive. Currently local brokers’ average expected EPS of 2021E stands at Rmb1.1, indicating 8.9x P/E 20201E, lower than its historical average. Also, better than expected excavator market demand and Zoomlion’s market share gain bring earnings upside potential. 


Hitachi Ltd. (6501 JP): Buys Kyoto Robotics, Plans to Sell Hitachi Metals

By Scott Foster

Hitachi Ltd.’s restructuring continues with the acquisition of Kyoto Robotics and the planned sale of Hitachi Metals. We regard both developments as positive. 

  • On April 8, the Nikkei reported that Hitachi Ltd. had given preferential negotiating rights for the sale of its 53.6% stake in Hitachi Metals metals to a consortium led by Bain Capital. The price was estimated at ¥800 billion (¥7.3 billion) or more, which could pay for most of Hitachi Ltd.’s recently announced purchase of GlobalLogic for $9.6 billion.
  • Also on April 8, Hitachi Ltd. announced that it had purchased 96% of Kyoto Robotics, a designer and producer of three-dimensional machine vision and AI control systems for handling robots. This gives Hitachi advanced robotics technology and expertise, enhancing its ability to provide integrated systems for logistics and factory automation.

The removal of Hitachi Metals (5486 JP) from Hitachi Ltd.’s consolidated accounts would reduce total revenues by 9% compared with FY Mar-21 guidance but have a small but positive short-term impact on operating profit.


Before it’s here, it’s on Smartkarma

Industrials: Toshiba Corp and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Toshiba – Tsunakawa’s Reappointment as EO Is Probably the End for Kurumatani

Toshiba – Tsunakawa’s Reappointment as EO Is Probably the End for Kurumatani

By Mio Kato

Toshiba was down 5.4% today after its board chair downplayed the possibility of any quick decision on CVC’s preliminary, non-binding offer. It is now down 11.2% from the ¥4,805 high yesterday and is 14.7% below the indicative bid price of ¥5,000 suggesting limited confidence in a bid actually going through. This is not necessarily wrong, but there is much to consider here and some of Toshiba’s moves here are interesting.


Before it’s here, it’s on Smartkarma